John Odling-Smee, Director of the International Monetary Fund’s (IMF) European II Department, told a press conference in Moscow today that IMF management and staff welcomes the Government’s statement about the measures that the government is taking to bring the fiscal situation under control. "In view of these adjustments in fiscal policy together with continued firm monetary policy and progress on structural reforms, the IMF management intends to recommend that the IMF’s Executive Board complete the 7th quarterly review under the Extended Fund Facility for Russia. This would release a tranche of $670 million.

"We are particularly reassured by the emphasis placed on the practical implementation of policies and the understanding by the new Russian government of the need for clarity, coherence, and continuity of government policy. When fully implemented, these measures would allow the reduction of the federal government budget deficit to 5 percent of GDP in 1998 and the achievement of primary balance. They also represent an attack on the two major problems that have frustrated attempts at fiscal consolidation in the past: weaknesses in tax collection and government spending commitments in excess of what can be afforded. This bodes well for the pursuit of fiscal adjustment in 1999 and beyond.

"The clarification and strengthening of fiscal policy implied by the Government’s statement should reassure financial markets that economic and financial policies are consistent with the government’s objectives of creating conditions for stronger growth and a continued reduction in inflation. The IMF management and staff believe that the Central Bank’s exchange rate policy is a key part of these policies, and that a devaluation of the ruble can and should be avoided. With the reestablishment of confidence in the currency, we hope to see stability return to financial markets. We intend to continue to work closely with the Russian Government to help ensure the achievement of these goals," Odling-Smee said.